Global Strategy: Competing Around the Word

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Transcript of Global Strategy: Competing Around the Word

Global Strategy: Competing Around the WordCost reduction & local responsiveness are the 2 opposing forces that MNE's face when competing around the globe.Strategy Around the World: Cost Reductions VS. Local Responsiveness- one of the core drivers of globalization to :1. achieve economies of scale2. drive down costsTo expand firm's total market- advanced by Prof. Theodore Levitt- states that: consumer needs and preferences throughout the world are converging and thus becoming increasingly homogenousexamples"globalization hypothesis"2003"Prius" - Latin: first/ original/ superiorPart II200820161997Definition of Terms:* local responsiveness- the need to tailor product and service offerings to fit local customer preferences and host-country requirements- generally entails higher cost, and sometimes even outweighs cost advantage from economies of scale and lower cost input factorsThe Integration-Responsive Framework: Global Strategy Positions and Representative MNE'sFour strategies:1. International strategy- a strategy in which a company sells the same products or services in both domestic and foreign markets-usually the first step companies take when beginning to conduct business abroad- advantageous if MNE's face low pressures for both local responsiveness & cost reductions- used by successful MNE's with relatively large domestic markets, strong reputations and brand names2. Localization strategy- MNE's attempt to maximize local responsiveness, hoping that local consumers will perceive them to be domestic companies- also called "multi-domestic strategy" - this strategy arises out of the combination of high pressure for local responsiveness and low pressure for cost reductions- usually used when MNE's entering host countries with large and/or idiosyncratic domestic markets (Japan/KSA)- downside: costly and inefficient because it requires the duplication of key business functions across multiple countries3. Global-Standardizaion strategy- MNE's attempt to reap significant economies of scale & location economies by pursuing a global dicision of labor based on wherever best-of-class capabilities reside at the lowest cost- arises out of the the combination of high pressure for cost reductions and lower pressure for local responsiveness - allows MNE's to strive for the lowest cost position as possible- cost leadership busness strategy- PRICE: main competitive weaponTo benefit from low cost labor and to be close to its main markets in order to reduce shipping costs. - advantages/key weaknesses: obtaining the lowest cost point possible by minimizing local adaptations4. Transnational Strategy- attemps to combine the benefits of a localization strategy (high-local responsiveness) with those of a global-standardization strategy (lowest cost position attainable)- " glocalization" - arises from the combination of high pressure for local responsiveness and high pressurefor cost reductions- usually used by MNE's that pursuean integration strategy at the business level by attempting to reconcile product and/or service differentiation at low cost- aims to: benefit from global learning- implemented through: a global matrix structure (combines economies of scale along specific product divisions with economied of learning attainable in specific geographic regions.)- difficult to implement: organizational complexities involved- matrix ogranization: costly because it requires that key business functions are frequently duplicated in each host countryWhy certain industries are more competitive in specific nations than in others?National competitive advantage- world leadership in some specific industriesPorter's National Competitive Advantage:1. Factor conditions2. Demand conditions3. Competitive intensity in focal industry4. Related and supporting inductries/complementor- describe a countries' endownments in terms of natural, human and other resources- specific characteristics of demand in a firm's domestic market- intense domestic competition- pharmaceauticals, health services, hospitalsRegional cluster - a group of interconnected companies and institutions in a specific industry, located near each other geographically and otherwise linked by common characteristicsEvaluate the relationship between location in regional cluster and firm-level competitive advantageDarlene Marie G. Vargas

Thank you!Knowledge spillover- positive externalities that are regionally constrained- exchange of ideas among firms in a cluster